Oct 8 - Fitch Ratings has assigned an 'AAAmmf' rating to theAllianceBernstein Exchange Reserves
, a prime money market fund managedby AllianceBernstein.
The rating assignment reflects the fund's extremely strong capacity to achieveits investment objectives of preserving capital and providing shareholderliquidity through limiting credit, market and liquidity risks.
KEY RATING DRIVERS
--The fund's overall credit quality and diversification;
--Short maturity profile;
--Minimal exposure to interest rate and spread risk;
--The capabilities and resources of AllianceBernstein as investment advisor.
As of Sept. 20, 2012, the fund had $2.04 billion in assets under management.
CREDIT QUALITY AND DIVERSIFICATION
The fund seeks to maximize current income consistent with the safety ofprincipal and liquidity by investing. These may include: short-term obligationsissued or guaranteed by the U.S. government, its agencies or instrumentalities;certificates of deposit issued by domestic and foreign banks; high-qualitycommercial paper (short-term corporate debt issued by U.S. or foreigncompanies); and other short-term investment instruments.
Under normal market conditions, the fund invests in securities rated at least'A-' or 'F1' by Fitch or equivalent or enters into repurchase agreements withcounterparties rated at least 'F1' or equivalent. Similarly, under normal marketconditions, the fund limits exposure of all credits in the portfolio to 5% ofits assets - this applies to direct issuers, repurchase agreementcounterparties, municipal letter of credit providers as well as underlyingmunicipal obligors. All repurchase agreements purchased are overcollateralizedby 102% with U.S. Treasury or government agency securities. The fund does notinvest in ABS, MBS or ABCP, other than Straight-A funding.
These investment policies are consistent with Fitch's 'AAAmmf' rating criteria.
As of Sept. 20, 2012, the fund's Portfolio Credit Factor, which is a riskweighted measure of the credit quality and maturity profile of portfolio assets,was also consistent with Fitch's 'AAAmmf' rating criterion of 1.50 or less.
The fund manages its market risk exposure by limiting its weighted averagematurity (WAM) and weighted average life (WAL) to 60 and 120 days, respectively.As of Sept. 20, 2012, the fund had a WAM of 33 days and a WAL of 75 days.
To limit liquidity risk, the fund seeks to invest at least 10% of its assets indaily liquid securities and at least 30% of its assets in weekly liquidsecurities. As of Sept. 20, 2012, the fund's available daily and weeklyliquidity levels were consistent with Fitch 'AAAmmf' rating criteria.
Approximately 50% of shareholder money in the fund originates from variousAllianceBernstein's equity mutual funds as part of their securitieslending/collateral reinvestment program. As a result, Fitch views theshareholder base as being somewhat concentrated relative to available overnightliquidity. However, this concentration risk is substantially mitigated byseveral factors, including the capabilities, resources and risk managementoversight of AllianceBernstein; the diversified nature of the various equitymutual funds and the securities lent; and a focus on lending 'hot issues' whereequity fund managers maintain long-term convictions. Furthermore, expectedinflows from external investors into the AllianceBernstein Exchange Reservesfund should serve to diversify the shareholder base over time.
AllianceBernstein, L.P., rated 'A+/F1' with a Stable Outlook, is a global,diversified asset manager (USD411 billion assets under management as at Aug. 31,2012), approximately 63% owned by AXA S.A. (rated 'A/F1', Outlook Stable). ABhas been investing in high yield and emerging market debt since the early 1990s.Money market assets under management were $9.2 billion as of Aug. 31, 2012.
RATING SENSITIVITY AND SURVEILLANCE
The rating may be sensitive to material changes in the credit quality, market orliquidity risk profiles of the fund. A material adverse deviation from Fitchguidelines for any key rating driver could cause the rating to be lowered byFitch, including adverse changes in shareholder concentration and/or increasesin unanticipated cash outflows. Given the portfolio's primary investment focuson domestic and foreign issuers in the financial sector, the ratings may also besensitive to material adverse changes in the sector globally.
Fitch expects to receive weekly portfolio holdings information from the fund'sadministrator to conduct surveillance against ratings guidelines and maintainits money market fund rating.
Surveillance and analytical information on this fund is expected to be availablein the Funds Surveillance section of Fitch's web site ('
')in the near future.
The sources of information used to assess this rating were the public domain andDIMA.
Additional information is available at '
'. The ratings abovewere unsolicited and have been provided by Fitch as a service to investors.
Applicable Criteria and Related Research:
--'Global Money Market Fund Rating Criteria', March 29, 2012;
--'U.S. Money Market Funds Sector Update: First-Quarter 2012', July 12, 2012.
Applicable Criteria and Related Research:
Global Money Market Fund Rating Criteria
U.S. Money Market Funds Sector Update: First-Quarter 2012
(New York Ratings Team)